Cape Town is poised for a commercial and residential real estate boom as the City’s gloves come off in the national battle to attract investment and boost regional economic growth. And according to High Street Auctions Director Greg Dart, the Mother City’s incentives are enticing: 60% less load-shedding than the rest of the country, a cash-for-power plan buying electricity from businesses that feed back into the grid and an across-the-board property rates relief package peaking at 52% for homes valued below R5 million.
Dart says it doesn’t take a rocket scientist to understand why a decade of trickling semigration from Johannesburg to Cape Town, has now become a flood. “South Africa had 35 days of load-shedding in 2020 and 48 days in 2021. These were enough to cause the financial equivalent of a flesh wound, but we were more focused at the time on triaging Covid’s economic arterial bleed.
“Last year, though, Eskom fell off a cliff and 207 days of load-shedding ensured that much of our fragile economy went with it. Longer outages compounded the devastation, with assembly and production lines across most of the country stopping for up to 12 hours a day. “The notable exception was and continues to be Cape Town, which cut outage hours for residents and local industry by nearly 60% between February and November last year, according to figures released by Mayor Geordin Hill-Lewis.
“Migration to Cape Town has been a matter of survival for many Joburg businesses that have already relocated, and I predict thousands more will follow in the short- to medium term.” Proof lies in data from StatsSA, which noted that the Western Cape’s 6.9% employment increase in the last quarter was the largest rise in the country. Gauteng’s quarter-on-quarter employment numbers dropped by -0.4%.
Dart says other South African metros will be hard-pressed to stem the flood of investment moving to Cape Town, because the City’s plan to mitigate at least four stages of Eskom load-shedding has been years in the making. “Cape Town is already well on its way to reaching its three-year grid security target.
“The Steenbras Dam has kept the lights on in Cape Town for 2 196 more hours than the rest of the country in 2022, and in January Hill-Lewis announced that the City can now pay cash for power fed into the local electricity grid because of its dispensation from the Treasury. “Businesses, and in time residents, will be able to earn from selling excess power to Cape Town. Work has already begun to get commercial enterprises with off-grid generation capacity on board, and the City is offering a payment incentive over and above the NERSA-approved rate.
“In contrast the City of Joburg’s R400 million plan to mitigate load-shedding by three stages was only announced in January. “The plan has one major snag though; Joburg’s metro doesn’t actually have the money to implement it. The Council says it’s ‘exploring the establishment of an infrastructure fund’, but without a firm rollout timetable load-shedding in the city is likely to remain at economically detrimental levels.”
PwC’s recent South Africa Economic Outlook 2023 report estimated that power cuts reduced the country’s potential real GDP growth by five percentage points in 2022, costing some 600 000 potential jobs. Dart says migration has historically been a significant lens through which to evaluate economic change. “Industrial Revolution migration permanently reshaped the world’s population, and goldrush migration later forged Johannesburg into South Africa’s financial capital. “Ironically, the very thing that built the city’s fortune is now causing its greatest haemorrhage of skills and investment. Joburg’s loss is fast becoming Cape Town’s gain.”
Lightstone figures show that in 2022, more people moved to the Western Cape than to Gauteng and KwaZulu-Natal combined. According to Lightstone, South Africa’s formal property stock volume totals 6.8 million and is valued at R6.1 trillion. At the moment, Gauteng tops the provincial lists with 35% of the stock and 38% of the national value.
But Dart says the demand for property in the Western Cape is evident in that the province accounts for a substantial 29% of the total national value, with only 18% of the stock. “There’s already greater demand/supply parity in Cape Town’s commercial and industrial real estate market than anywhere else in the country, but that’s changing. Smart investors will move swiftly before it turns.
“We’re already well into March and so far this year South Africans haven’t had a single day’s respite from load-shedding. “Trading from a city where the lights stay on longer is an economic no-brainer.”
